Wednesday, October 24, 2007

Institutional ignorance

When most people hear that I study economics, they say, “Oh, a good, solid, libertarian subject”. However, having been rejected by Cambridge after trying to teach Partha Dasgupta* about the Laffer curve, I don’t exactly hold my own subject in the highest of regards.

[The government] printing money has no negative effect on the economy: only good. In the Western system, with the separation of politicians from central banks, this is not possible. However, [PR] China, which is my country, we have this without negative effects.

Squeamish Westerners. If only our government was more like the Chinese and risked over-inflating our economy just as theirs has done. And if only our government was more hard-nosed and cared as little about deliberately keeping down the value of private assets as they did over there. Darn bourgeois property rights getting in the way of sound economics…

What the fuck?

Let's just look at that key line again.

[The government] printing money has no negative effect on the economy: only good.

And again.

[The government] printing money has no negative effect on the economy: only good.

Again.

[The government] printing money has no negative effect on the economy: only good.

This is economics as it is taught at University College London, ladies and gentlemen. This is economics as taught at a university level. What the fucking fuck-fuck fuck?

Let's have that line again, shall we?

[The government] printing money has no negative effect on the economy: only good.

Perhaps someone should tell Robert Mugabe that all he has to do to sort out the economy that he has so comprehensively fucked is to print money because there are no negative effects.

As usual DK you are spot on printing excess money is not going to have any advantage it will just dilute the economy, its technical name is seniorage. It was used by monarch's to get money for wars henry the VIII was the main user of this techniques.

Although seniorage itself is not going to help the situation all of the other methods of stimulating aggregate supply will also create inflation, so it is difficult to find an answer to the prolbem when you have a reduction in aggregate supply.

Also that post about JFK is correct the notes that were printed off were lined with a red band I believe there is a video if anyone wants to see it tell me and I will post the link.

I made the last comment. I would like to add that when I was at university my lecturer thought that if all transactions were made through computers then there would be no inflation.

This is incorrect if there is an increase or decrease in aggregate demand in relation to aggregate supply then no matter what media used to act as the currency it will create a inflationary of deflationary gap.

It just goes to show you that there is serious lacking in economic knowledge. Also I had a meeting with a top top politician that has a phd in finance and economics and I said that there was cost push inflation he questioned this and I said that if interest rates are rising and inflation is still rising and taxes are high the inflation cannot be created by a increase in aggregate demand and must be created by decrease in aggregate supply this is the definition of cost push inflation. It just goes to show you that they are not that clued up.

What if the economy grows? Surely then we need more money to flow around and to sit in people's bank accounts, otherwise, if we did not (this includes indirect money printing via ever more outstanding fiat loans) it becomes a bit zero-sum, surely?